This guidance reflects provisions in Part 4 and Part 5 of the Landfill Disposals Tax (Wales) Act 2017 (LDTA).
Determining the amount of tax payable such as tax chargeable on taxable disposals
This guidance reflects provision in Parts 3 and 4 of, and Schedule 1 to, the Landfill Disposals Tax (Wales) Act 2017 (‘LDTA’). In particular it provides an overview of how tax is charged and the 3 tax rates (standard, lower and unauthorised); requirements for disposals to be charged at the lower rate (qualifying materials or qualifying mixtures of materials: fines); and loss on ignition testing. It provides information on penalties that may be applied and penalties specific to the loss on ignition testing regime.
LDTA/4010 Calculation of tax chargeable
Landfill disposals tax is calculated on the basis of the weight of material disposed of. The amount of tax to be charged will be calculated by multiplying the weight of the material (in tonnes) by a tax rate.
The tax rates and bands are set by the Welsh Government and approved by the National Assembly for Wales.
A taxable disposal at an authorised landfill site will be charged at the standard rate unless the material being disposed of consists entirely of one or more qualifying materials or is a qualifying mixture of materials, in which case the lower rate will be charged.
A taxable disposal made at a place other than an authorised landfill site will be liable to be charged at the new unauthorised disposals rate. This is regardless of the nature of the material disposed of and whether it would otherwise be subject to the standard rate or lower rate if disposed of at an authorised landfill site.
LDTA/4020 Qualifying material
Qualifying material is material specified in the table in Schedule 1 to LDTA which meets all of the relevant conditions relating to it. This includes the following groups of materials:
- naturally occurring rocks and soil
- ceramic or concrete material
- processed or prepared minerals
- furnace slag
- low activity inorganic compounds
- calcium sulphate (when disposed of at a site that is authorised to accept non-hazardous waste only and when disposed of in a cell that does not contain any biodegradable waste), and
- calcium hydroxide and brine (when disposed of in a brine cavity).
In order to qualify for the lower rate, there must be a written description of the material meeting the requirements of section 34 of the Environmental Protection Act 1990 ‘EPA’ where a waste transfer note is required by that provision. References to waste classification codes alone are not sufficient to support a claim to the lower rate.
For example, the WRA will generally expect to see details of any pre-treatment or processes that have been applied to the material. This expectation is supported by the Waste Duty of Care Code of Practice that is published under section 34 EPA (see paragraph 4.4. in particular) available here.
The LDT requirements do not replace the landfill site operator’s obligations in relation to the written description under environmental law.
If no written description is required under section 34 EPA, the WRA will require other evidence to demonstrate that the material meets the relevant requirements. This could include information from:
- waste producers on the source/nature of the material
- waste transfer stations e.g. evidence of effective segregation or sourcing waste, and
- waste tests – waste producers may be required, under environmental legislation, to test waste.
LDTA/4030 Qualifying mixtures of materials
The lower rate applies to the disposal of a qualifying mixture of materials. This is the case where the material comprises both qualifying material and a small amount of non-qualifying material that is incidental to the qualifying material. In determining whether an amount of non-qualifying material is a small amount, both its weight and volume must be taken into account. In determining whether an amount of non-qualifying material is to be treated as incidental, its potential to cause pollution must be taken into account. This means that the impact of the volume and weight of the standard material in the mixed load on the nature and composition of the load is insignificant and its presence accidental and unavoidable. The difficulty in separating qualifying from non-qualifying material may be relevant in assessing whether the amount of non-qualifying material is small and incidental, but is not of itself determinative.
There are a number of other requirements to be met if a mixture of material is to be a qualifying mixture:
- as for qualifying material, there must be a written description of the material in waste transfer note (if a transfer note is required under section 34 of EPA) or other evidence from which it can be determined that the material meets the relevant requirements (see LDTA/4020 for more information)
- there must be no deliberate mixing of qualifying and non-qualifying material for the purposes of disposal. In this context, it will be important for the landfill site operator to demonstrate the steps that the waste processor takes to separate qualifying and non-qualifying waste streams and to store them separately. It is good practice for a landfill site operator to familiarise themselves with their customers’ processes, for example, by carrying out onsite inspections and taking note of the steps taken to separate waste streams
- the mixture must not be hazardous waste within the meaning of the European Waste Directive. If the amount of non-qualifying material in a mixed load is such as to classify the load as hazardous, all of that load will be chargeable at the standard rate. This will be assessed against WM3, with which landfill site operators musty already comply. The landfill site operator should review evidence of non-hazardous classification and be satisfied that it appears to be a true and accurate assessment. A copy of this evidence should be retained by the landfill site operator
- there must be no arrangement in respect of the mixture, the purpose of which is the avoidance of tax
- if the mixture consists entirely of fines, all requirements in relation to qualifying mixtures of materials consisting entirely of fines must be met.
LDTA/4040 Qualifying mixtures of materials: fines and loss on ignition test
When consulting the guidance in this section, please read in conjunction with the Qualifying Mixtures of Materials: Fines Notice.
Fines are particles produced by a waste treatment process that involves mechanical treatment (such as trommelling, crushing, screening, grading or soil washing). The lower rate will apply to a qualifying mixture of material that consists entirely of fines, only where a number of requirements are met (in addition to those that apply to qualifying mixtures).
Where a landfill site operator wants a mixture of material consisting entirely of fines to be treated as a qualifying mixture of material (and subject to the lower rate of tax), the following requirements must be met in relation to that mixture:
- the operator must comply with the general requirements in respect of loss on ignition testing, set out in regulation 5 of the Landfill Disposals Tax (Administration) (Wales) Regulations 2018 and the material must not be prohibited from being treated as a qualifying mixture because of a failure to comply with those requirements
- the operator must comply with the WRA Notice – Mixtures of materials consisting entirely of fines, published under section 17(5) LDTA (‘the Notice’), and
- If a loss on ignition test has been carried out on a sample of the taxable disposal, the loss on ignition percentage indicated by the test must not have exceeded 10% (unless the WRA specifies otherwise).
LDTA/4050 Step 1: Pre-acceptance requirements
When consulting the guidance in this section, please read in conjunction with the Qualifying Mixtures of Materials: Fines Notice.
When the waste fines arrive at a landfill site for disposal, the landfill site operator is responsible for the inspection of disposals when accepting delivery of waste. This inspection should ensure that the description of the material on the written description accurately matches the material delivered on site throughout the load.
Example – Visual inspections can take place in a number of ways:
- When the load is on the weighbridge, overhead cameras can be used to identify the waste, providing photographic evidence
- When the load is deposited onto the landfill site, the person in charge of deposited loads could inspect the waste as it is being tipped and potentially take photographs as evidence
- The landfill site operator should retain an audit trail to show that the waste fines have been inspected. This should be supported by the detailed description of the waste given in the pre-acceptance questionnaire.
The WRA Notice section 2.2 requires a pre-acceptance questionnaire to be completed for each waste stream, before the first load of waste fines from a particular waste stream are accepted at a landfill site. It identifies what information should be contained in the questionnaire and that it should be kept up-to-date at all times. This is just one element of the range of evidence required to demonstrate that the waste fines qualify for the lower rate. In the absence of satisfactory evidence to demonstrate that the waste fines are liable for the lower rate, the standard rate should be applied.
The pre-acceptance questionnaires will not routinely need to be submitted to the WRA but the landfill site operator will be expected to keep them on record. The WRA could, however, request sight of these records as part of compliance checks as evidence of the tax rate applied by the landfill site operator. Where the WRA does request these records, the landfill site operator must provide them.
To request a template pre-acceptance questionnaire, please contact your customer relationship manager or email LDTmailbox@wra.gov.wales.
Landfill site operators that operate across a number of sites will be responsible for determining how this information would be made available at each site. Landfill site operators should require waste producers to notify them of any change to the waste stream that would change the information in the pre-acceptance questionnaire which may cause its classification to vary.
Where no satisfactory questionnaire (or alternative information) is available, the waste will be subject to standard rate LDT and the WRA may impose a record keeping penalty (up to £3000).
Examples when a pre-acceptance questionnaire would need to be updated:
- If the nature of the waste stream changes: seasonal changes may impact on input materials that are used to produce waste fines. In these circumstances, the landfill site operator would review the information provided for the waste stream in the pre-acceptance questionnaire and require the waste producer to notify them of the change to the waste fines input material.
- Where a landfill site operator would need to submit a failed loss on ignition test result to the WRA.
Example of a situation where someone other than the landfill site operator would authorise a completed pre-acceptance questionnaire:
- For some landfill site operators, authorisation of pre-acceptance questionnaires is performed by a centralised waste compliance team. The information is made available on the landfill site operator system, notifying them of the new waste stream or a change in an existing pre-acceptance questionnaire. The landfill site operator would then be expected to comply with all other pre-acceptance checks.
Example of situation where someone other than the landfill site operator would authorise a completed pre-acceptance questionnaire:
- There may be instances where a corporate group has been established for the purposes of a single tax return. It would be the responsibility of a representative member, on behalf of the group, for authorising pre-acceptance questionnaires.
LDTA/4060 Step 2: Loss on ignition – related requirements
When consulting the guidance in this section, please read in conjunction with the Qualifying Mixtures of Materials: Fines Notice.
If a waste producer disposed of a waste stream of waste fines across a number of sites, and there was a completed pre-acceptance questionnaire for this waste stream, the loss on ignition testing cycle would apply per site.
Frequency of testing
The WRA will expect landfill site operators to adopt the same sample preparation and methodology used since the introduction of the loss on ignition test in April 2015. This is set out in the WRA Notice ‘Mixture of materials consisting entirely of fines’, part 3 ‘loss on ignition-related requirements’, which provides information and direction on when to do the first test and subsequent tests.
Late or missed tests
If a landfill site operator carries out a loss on ignition test late, i.e. after the required date, the date of the next test will be determined by the date at which the last test should have been taken, not the actual date of the late test.
For example, if a test should have been carried out at 1,500 tonnes and was not carried out until 2,000 tonnes, the date of the next test will be calculated from the time at which 1,500 tonnes had arrived at the site. Moreover, the standard rate will apply to all loads entering the site when a loss on ignition test is outstanding and has not been done (i.e. in the example above, all loads entering the site from 1,500 tonnes until the point of testing at 2,000 would be subject to the standard rate.
This is different from the approach taken in the rest of the UK where the date of the next test is calculated by reference to the date of the last test, even if this happened later than it should have.
WRA power to carry out loss on ignition tests
The Landfill Disposals Tax (Administration) (Wales) Regulations 2018 give the WRA powers to:
- direct that a landfill site operator carries out an independent loss on ignition test, and
- take a sample and carry out a loss on ignition test, separately to the landfill site operator.
If the WRA directs a landfill site operator to take a sample and undertake a test, the landfill site operator will be responsible for the cost of this. If the WRA takes a separate sample for testing, the WRA would cover the cost of this. If the conditions of the original WRA loss on ignition test allowed for a re-test, the landfill site operator would be able to request that the WRA re-test some of the same sample.
If the WRA decides to undertake an independent loss on ignition test, it will adopt the same sample preparation and methodology as set out for the landfill site operator.
Loss on ignition tests
The WRA Notice ‘Mixture of materials consisting entirely of fines’, part 3.3 ‘conduct of loss on ignition tests’ provides direction and information on the testing regime: what the test does; the frequency of testing; taking a sample; the test methodology (sample preparation and treatment); and the loss on ignition calculation.
The tax return will require the landfill site operator to provide the WRA with the number of loss on ignition tests taken and the number of failed tests.
Any loss on ignition tests conducted as part of Waste Acceptance Criteria (WAC) testing do not override the landfill site operator’s responsibility to conduct the WRA’s loss on ignition testing cycle.
LDTA/4070 Step 3: Loss on ignition reporting
Failed loss on ignition tests
For failed loss on ignition test results, the landfill site operator will be required to provide information on what the failure relates to and the measures put in place to manage and reduce the risk. The WRA Notice section 3.5 onwards contains information on details which landfill site operators will be expected to record and keep for each loss on ignition test carried out, and additional information which will need to be recorded for a failed test.
To request a template loss on ignition test result form, please contact your Customer Relationship Manager or email LDTmailbox@wra.gov.wales.
Each tax return made by the landfill site operator should be accompanied by all failed loss on ignition test result forms relevant to the tax period in which the test result was received. Currently, landfill site operators will not be able to attach the forms as part of the online tax return but will be able to email or post the completed forms to the WRA.
The WRA Notice section 3.4 ‘re-testing in the event of a failed loss on ignition test’, provides the conditions under which a re-test would be allowed. If the result of the re-test was 10% or less, the original test result may be ignored.
For waste fine loads where there has been a loss on ignition retest, the result would be in the accounting period for the retest date.
In the event of a failed loss on ignition test, the frequency of testing table will determine future testing requirements and tax liability, contained in the WRA Notice section 3.2.2 ‘subsequent tests’. This table contains ‘low’ and ‘high’ risk indicators.
Summary of steps to be taken for failed loss on ignition tests
Apart from circumstances which would allow for an initial loss on ignition retest, if the test is conducted and the result is above the 10% threshold, the landfill site operator must:
- Complete a loss on ignition failed test result form to confirm that:
- the standard rate of tax was charged for the load of waste fines above the threshold, and the tonnage of the failed load
- if required, the frequency of testing has been increased in line with the Frequency of Testing table in the WRA Notice, section 3.2.2 ‘subsequent tests’
- the landfill site operator has reviewed and updated all of the pre-acceptance checks completed for that particular waste stream for the waste producer, and
- the Welsh Revenue Authority will be notified by submission of:
- a completed loss on ignition failed test result form, and
- a copy of the laboratory test result
- in the tax return provide information on the number of tests taken (including by the WRA) and the number of failed test results for that accounting period
- send the completed form and laboratory report to the WRA (post or email), in addition to the online tax return.
LDTA/4080 Record keeping
Landfill site operators are responsible for ensuring that they accurately declare the amount of landfill disposals tax due on waste disposed at their site(s). This includes keeping sufficient evidence i.e. records to substantiate tax returns. Landfill site operators should be able and prepared to make their records available to the WRA, when the WRA asks to see them. The landfill site operator must provide any information that the WRA requests about its taxable activities.
The WRA may occasionally visit premises to audit the landfill site operator’s records, accounting systems and business. These visits would usually be made by appointment, at a time convenient for the relevant landfill site operator.
Examples of record-keeping time periods that would enable the qualifying fines to be charged at the lower rate:
- 3 months: Untested samples for loss on ignition testing – at least 1kg - to be kept for 3 months after the due date of the relevant landfill tax return.
- 6 years: Digital or paper evidence of loss on ignition test results; pre-acceptance questionnaire or landfill site operator equivalent; written descriptions; loss on ignition retesting: evidence to confirm that any retests take place within 21 days of the completion of the date on which the laboratory completed its analysis of the first test; loss on ignition failed test result form.
For all other records related to waste fines and loss on ignition testing (paper and digital), landfill site operators will be expected to keep them for 6 years in line with the Tax Collection and Management (Wales) Act 2016, sections 38-42 i.e. records need to be kept 6 years from the day on which the tax return is made or, if the tax return is amended, 6 years from the date of amendment – potentially another 12 months.
Regarding the untested samples for loss on ignition testing, best practice has shown that keeping them in airtight containers or freezers better protects their composition.
If the landfill site operator wishes to keep digital records, rather than paper records, digital continuity arrangements will need to be in place to ensure that records are accessible for over 7 years.
With reference to loss on ignition testing reporting, if the WRA requests sight of evidence and it cannot be provided, the landfill site operator may be subject to a record-keeping penalty of up to £3,000.
Table 1 below provides a summary of landfill site operator’s responsibilities for lower rating of qualifying fines, accompanied by the consequences of failing to comply. In all circumstances, if the landfill site operator has not declared the correct amount of tax, they may be liable to a penalty and interest on the undeclared tax.
|Ref||Requirement/condition||Consequences of failure to comply|
|1||Landfill site operator must hold evidence that fines are qualifying fines||Failure to hold evidence that fines are qualifying fines will render the quantity of fines for which evidence is not held liable to the standard rate|
|2||The written description must be held and it must contain a description that identifies the material as qualifying fines||Failure to hold a written description which describes qualifying fines so they can be identified as such will render the fines for which the notes should be held liable to the standard rate|
|3||Where WRA requests an additional loss on ignition test under WRA Notice, para 3.2.5 ‘Directions to carry out LOI test’||Failure to conduct the test will render those fines for which the test was not conducted liable to the standard rate|
|4||The landfill site operator must conduct the prescribed test to the prescribed frequency of testing for each waste processor disposing fines at the landfill site and for each of their processes producing fines, including additional tests under WRA Notice para 3.2.3 ‘early tests’||Failure to conduct the prescribed test to the prescribed frequency will render all fines the landfill site operator receives from the date of the failure to conduct the prescribed test liable to the standard rate, until such time as the failure is put right in relation to a later quantity of fines|
|5||The landfill site operator must conduct the prescribed test under WRA Notice para 3.3 ‘conduct of LOI tests including: the prescribed methodology for selecting a representative sample; and the prescribed standard loss on ignition test.||Failure to conduct the prescribed test according to the correct methodology will render all fines the landfill site operator receives liable to the standard rate from the time of that failure until such time as the failure is put right in relation to a later quantity of fines|
|6||The landfill site operator must retain master (untested) samples of tested fines for a period of 3 months from the due date of the tax return so that it can be re-tested if appropriate (see WRA Notice, para 3.4 ‘re-testing in the event of a failed loss on ignition test)||Failure to retain samples will render the landfill site operator liable to a penalty of up to £3,000 (see Landfill Disposals Tax (Administration) (Wales) Regulations 2018, part 2, regulation 8 ‘Penalty for failure to comply with requirements relating to evidence’|
|7||Landfill site operators must make and preserve the following for 6 years:
||Failure to make and preserve: evidence that fines are qualifying fines; records of tests conducted will render the landfill site operator liable to a penalty of up to £3,000 (see Landfill Disposals Tax (Administration) (Wales) Regulations 2018, part 2, regulation 8 ‘Penalty for failure to comply with requirements relating to evidence’|
|8||The tested sample must meet the loss on ignition threshold||Where a test is above the loss on ignition threshold, the full load of fines, from which the sample was taken|
|9||Landfill site operators must notify the WRA of all tests (below and above the threshold) with every tax return||Failure to notify WRA of the number of tests conducted and the number of failures, will render the landfill site operator liable to a penalty|
LDTA/4100 Transitional arrangements
The notice sets out transitional arrangements in relation to ‘pre-acceptance requirements (section 2.2.1); ‘the first loss on ignition test’ (section 188.8.131.52) and ‘subsequent loss on ignition tests’ (section 184.108.40.206).
The following applies for landfill site operators currently registered for the purposes of landfill tax:
Up to 1 April 2018, checking arrangements will be honoured as long as they are in line with the existing UK law and meet HMRC’s Excise Note LFT1 on pre-acceptance requirements. The landfill site operator will not be required to complete a new pre-acceptance questionnaire for a waste stream where waste fines have been received on a site before 1 April, even if they are disposed of after this date, unless the nature of the waste stream changes. The Landfill site operator will need to keep a copy of such questionnaires.
First loss on ignition test
If a landfill site operator conducted a loss on ignition test on waste fines before 1 April 2018 and the date of the test result is on or after 1 April 2018, this should be dealt with under the pre-existing arrangements as per The Landfill Tax (Qualifying Materials) Order 2015 and HMRC’s Excise Note LFT1.
Where waste fines have been brought onto the site before the 1 April 2018, the loss on ignition testing cycle should be carried forward i.e. the landfill site operator is not required to put in place a new loss on ignition testing cycle as directed under the WRA notice ‘Mixtures of materials consisting entirely of fines’.
Any waste fines delivered to the site from 1 April 2018 will need to be compliant with the LDT regulations. This is consistent and in line with other areas in LDTA, for example water, reliefs, non-disposal areas and registration.
If the WRA carries out any inspections involving any loss on ignition testing undertaken in April 2018, for waste fines delivered before April 2018, any consequences would be as for LDTA.
Subsequent loss on ignition tests
For all existing customers (waste producers) that produce waste fines, the loss on ignition testing cycle before 1 April 2018 would remain the same after 1 April 2018, as follows:
- for existing customers, where there have been no failed tests for a particular fines waste stream, the testing cycle before 1 April 2018 will continue
- for existing customers, where there has been one failed test for a particular fines waste stream before 1 April 2018 and a 2nd failed test result after 1 April 2018, the landfill site operator will be expected to move to more frequent testing arrangements in line with the Frequency of Testing table in the WRA Notice ‘Mixtures of materials consisting entirely of fines’, section 3.2.2.
So, for example, if there is one failed loss on ignition test on the mixture before 1 April 2018 and another failed test after that date, both failures must be taken into account. Where there are 2 failed tests within the last 20 tests, this will mean that one of the high risk indicators is present and that the next test must be carried out on the mixture at the interval specified in relation to high risk mixtures in the Table.
- For existing customers where there has been more frequent testing on a fines waste stream as per HMRC’s Excise Notice LFT1 ‘Frequency of Testing table’ cycle, this should continue until there have been 20 consecutive compliance tests. The low risk classification will apply unless the pre-acceptance checks or visual inspection indicate the fines waste is still high risk.
HMRC’s Excise Notice LFT1 and the WRA Notice ‘Mixtures of materials consisting entirely of fines’ contain the same risk indicators (high and low) in the frequency of testing table which will allow a seamless transition to the new arrangements.
Test results will need to be submitted with the first online quarterly return for the tax year 2018/2019, alongside results of other tests during that quarter, in line with LDTA requirements and evidence retained as part of record keeping requirements.
Any loss on ignition samples held before 1 April 2018 but tested after 1 April should be kept for 3 months after the due date of the next LDT return, under the new record-keeping arrangements within LDTA and the Regulations.
Example of types of treatment process that could produce qualifying fines:
- The waste producer runs 2 separate lines, one for mixed waste from which the fines are not qualifying and are standard rates; and one for mainly qualifying waste with some non-qualifying material, from which the fines may be qualifying fines.
- The waste producer produces fines through their treatment process from mixed waste sources but then subjects it to a further fines treatment process which can remove the majority of the non-qualifying material to leave qualifying fines.
- However, if a waste producer shreds mixed municipal waste and subjects it to a basic treatment process, with no initial or further separation of non-qualifying material the waste would not be qualifying fines at this stage of processing.
LDTA/4190 Customer Insolvency Credit
This guidance provides an overview of the customer insolvency credit, the circumstances that give rise to the credit and the process for making a claim. It should be read alongside section 54 of the Landfill Disposals Tax (Wales) Act 2017 (LDTA) and Part 3 of the Landfill Disposals Tax (Administration) (Wales) Regulations 2018.
LDTA/4200 Entitlement to customer insolvency credit
Before claiming the customer insolvency credit, a landfill site operator or former landfill site operator (“the claimant”) must be satisfied that all of the following requirements are met:
- A taxable disposal must have been made at an authorised landfill site.
- The claimant must have been registered as the operator of the site at the time of the disposal, and the claimant must have either made the disposal or permitted the disposal to be made.
- Money must have been charged in relation to the disposal to a customer who is not (and was not at the time of the disposal) connected with the claimant. Whether a person is considered to be ‘connected’ to another is determined in accordance with sections 1122 and 1123 of the Corporation Tax Act 2010.
- The claimant must have issued a landfill invoice to the customer within 14 days of the date of the disposal (any longer period agreed by the WRA under section 41(6) LDTA in respect of the disposal. See LDTA/5040.
- The claimant must have already accounted for and paid the tax chargeable on the disposal.
- The customer must have become insolvent within the period of 12 months (beginning with the date on which the landfill invoice was issued) and must have failed to pay the whole or part of the consideration due in respect of the disposal.
- The claimant must have been unable to recover the unpaid consideration, despite having taken reasonable steps to do so.
- Before concluding that money remains outstanding from the customer, the claimant must have set off against the amount of unpaid consideration any debt owed to the customer and reduced the amount of unpaid consideration by the value of any enforceable security that they hold in relation to the customer.
Even if a claimant meets all of the above 8 requirements, they are not entitled to the customer insolvency credit if they have previously benefitted from any amount of customer insolvency credit in respect of the same taxable disposal.
LDTA/4210 Meaning of insolvency
For the purposes of claiming the customer insolvency credit, a customer will be considered to have become insolvent if they are subject to an insolvency event.
An insolvency event is one of the following:
- a company voluntary arrangement
- an administration order or the appointment of an administrative receiver
- the commencement of a creditors’ voluntary winding up or a winding up by the court
- a debt relief order
- an individual voluntary arrangement
- a bankruptcy order
- any corresponding event that has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom.
LDTA/4220 Determining the amount of customer insolvency credit
Allocation of payments
For the purposes of determining whether there is a debt owing from the customer that can form the basis of a claim to customer insolvency credit and the amount of that debt, there are rules about how payments to and from the customer should be treated (Regulation 16 of the Landfill Disposals Tax [Administration] Wales Regulations 2018).
Generally, if a claimant receives payment from a customer (where the claimant made a taxable disposal on behalf of that customer and where a customer owes money for that disposal), the payment will be treated as allocated to that debt.
However, if a claimant has more than one debt outstanding from a customer and the customer makes a payment to the claimant, this payment should be attributed firstly to the oldest debt, then to the next oldest debt if there is a remainder, and so on.
No attribution should be made, however, if the payment was allocated to a specific debt by the customer at the time of payment and the debt was paid in full.
Where the earliest debt and the other debts to which the whole of the payment could be attributed arose on the same day, the payment shall be attributed to those debts by using the below formula.
Allocation = TP x (D ÷ TD)
- “Allocation” is the amount of the allocation
- TP is the total amount of payment to be allocated to the debts arising on that day
- D is the amount of the particular debt in question
- TD is the total amount of all of the debts which:
- arose on that day, and
- are owed by the customer to the claimant.
Calculation of amount of customer insolvency credit
The amount of customer insolvency credit to which a person is entitled to should be calculated in accordance with the below formula:
Credit = T x (OC ÷ C)
- “Credit” is the amount of the customer insolvency credit
- T is the amount of tax which the person has accounted for in respect of the disposal in a tax return. Where the amount of tax accounted for in respect of the disposal is increased, the increase is to be ignored
- OC is the amount of the outstanding consideration in respect of the disposal (having set off any debt owed to the customer and reduced the amount of unpaid consideration by the value of any enforceable security)
- C is the consideration for the disposal.
Where the amount of tax chargeable on the disposal is less that the amount of tax accounted for in respect of the disposal (ignoring any increase):
T is the amount of tax chargeable on the disposal.
C and OC are each to be reduced by an amount equal to the difference between the 2 amounts of tax.
LDTA/4230 Claims by landfill site operators
The landfill site operator is satisfied that they meet all the requirements set out at LDTA/4200, a claim to customer insolvency credit may be made in a tax return in respect of the first qualifying accounting period or any subsequent accounting period.
The first qualifying accounting period is that in which the 6-month anniversary of the date of the relevant insolvency event falls. The relevant insolvency event is the first insolvency event that occurred in relation to the customer.
The claim is made by setting off the amount of the credit against the amount of tax that person would otherwise be required to pay under section 42(1) of LDTA.
Where the total credit claimed exceeds the total tax due for the accounting period, WRA will repay the landfill site operator an amount equal to the excess. The WRA will only pay the remaining amount if all tax payments are up to date and if every tax return that the person is required to make in respect of the tax has been made.
LDTA/4240 Claims by other persons
Provided that a formerly registered landfill site operator is satisfied that they meet all of the requirements set out at LDTA/4200 they may claim the credit by making an application to the WRA in writing. The application may not be made before the expiry of the period of 6 months beginning with the date of the relevant insolvency event. The WRA will only pay if satisfied that:
- the person is not registered
- the person is entitled to the credit, and
- the entitlement to the credit has not been transferred to any other person
LDTA/4250 Evidence in support of claims
When making a claim for customer insolvency credit, the landfill site operator must hold the following records:
- a copy of the landfill invoice that they issued for the taxable disposal
- records or other documents showing that they have accounted for and paid tax on the relevant disposal
- records or other documents relating to any payment made by the customer in respect of the consideration for the disposal
- records or other documents relating to any debt owed by the landfill site operator to the customer or any enforceable security held by them in relation to the customer
- records or other documents relating to any steps taken to recover the outstanding consideration for the disposal.
This evidence does not need to be submitted to the WRA when making a claim, but the evidence must be preserved for a period of 6 years beginning with the day the claim was made and the WRA may ask to see it.
LDTA/4260 Customer insolvency credit record
When a claim is made, the landfill site operator must make the record of that claim and keep the record up to date. It needs to be maintained for 6 years from the later of the day on which the claim was made or the day on which the record of the claim was most recently updated
A customer insolvency credit should contain the following information in respect of each taxable disposal to which the claim relates:
- the amount of tax chargeable on the disposal
- the consideration for the disposal
- the return in which that tax was accounted for and when it was paid
- the date and identifying number of the landfill invoice that was issued
- in the case of a disposal of material for which a written description is required by virtue of section 34(1)(c)(ii) of the Environmental Protection Act 1990(1), the written description
- any payment or other consideration received, whether before or after the landfill site operator makes the claim
- any steps taken to recover the outstanding consideration for the disposal.
The return must also contain the following information:
- the total amount of the claim.
- the tax return in which the claim was made.
- the total amount of outstanding consideration in respect of which the claim is made.
- where if more than one claim is made by the same claimant, the customer insolvency credit records required for each claim be kept in a single account (known as the ‘customer insolvency credit summary’).
LDTA/4270 Recovery in the event of customer payment
If a landfill site operator has benefitted from a credit for customer insolvency credit and they subsequently receive any payment from a customer that is treated as attributed to the relevant disposal they will have to make a payment to the WRA.
The payment needs to be made before the end of 30 days beginning with the day on which the claimant received the payment from the customer.
The amount that needs to be paid by the claimant to the WRA should be calculated using the below formula:
Payment = RCredit x (P ÷ OC)
- “Payment” is the amount of the payment that must be made to the WRA.
- “RCredit” is the relevant amount of customer insolvency credit.
- P is the amount of payment that is treated as being allocated to the debt owed in respect of the consideration for the disposal.
- OC should be calculated using the formula above in ‘calculation of amount of customer insolvency credit’.
Amount of credit claimed - £41.81
Payment received - £20.00
Amount of debt outstanding - £92.50
Amount repayable = £41.81 x £20/£92.50 = £9.04
LDTA/4280 Recovery in the event of failure to keep records or other evidence
Where a claimant has benefitted from customer insolvency credit but has failed to comply with the requirements to keep records and other evidence, WRA may recover the amount of customer insolvency credit claimed.
To do this, the WRA must do the following:
- Assess the amount of customer insolvency credit claimed
- Issue a notice to the claimant that specifies the amount assessed and requires the person to pay that amount to the WRA
The claimant must pay the required amount within 30 days beginning with the day on which the notice is issued.
The claimant is not required to pay the amount issued in the notice in the following circumstance:
- if the claimant provides other documentary evidence (within 30 days beginning with the date on which the notice is issued) that prove the facts that the records (as detailed at LDTA/4250 and LDTA/4260) would have shown, and
- The WRA issues a further notice to the claimant stating that this documentary evidence is sufficient evidence